Surge in building, price increases point to stronger sector
As the new year arrives, Colorado has made a near complete recovery from the housing and real estate woes that plagued the nation following 2008: home prices in the Denver area and other cities are showing price increases over pre-recession levels; and a few other areas that were the hardest hit by the recession are now showing substantial recovery.
Meanwhile, with Colorado’s attractive economy paired with the state’s environmental and recreational attractions, Denver now ranks in various surveys as one of the most, if not the most, sought-after cities in the nation to relocate; and its suburban areas are climbing high in quality-of-life rankings.
Home sales in the Denver area topped 56,400 units in 2014, a modest gain over sales in 2013 that has more to do with lack of home supply than with modest demand. Prices did what prices do when too many buyers chase after too few homes. Home prices were up around 9 percent in the metro to an average list price of $329,306 – way beyond the average of around $250,000 that metro Denver homes commanded in 2008, when the national downturn began.
Real estate agents see sellers acclimating to the higher- priced atmosphere and looking ahead for opportunities to market their older homes after waiting years for what they consider to be acceptable prices.
Builders, meanwhile, moved ahead to fill in the supply gap with their products, picking types and price ranges where demand is safest – including move-up single-family products and increasingly popular ranch designs that fit the needs of the retiring baby-boom generation, as well as younger families looking for something affordable.
That wave of generally higher-priced single-family building is reshaping the empty spaces around the Denver area – filling in Castle Rock, south Aurora, western areas of Parker, northwestern communities like Arvada, Westminster, Broomfield and Erie, and the remaining empty ground in master-planned Stapleton, site of Denver’s former airport, with new neighborhoods. Builders serving northern Colorado, where oil and gas joined favorable high-tech business growth to create growing demand in 2014, pushed out the frontier around Loveland, Fort Collins, Greeley and Windsor.
That building activity, climbing back from the slow years, is nowhere near historic highs that Colorado saw in some previous decades, and the reasons why suggest the increasing cost of obtaining platted sites, permitting homes and utility taps, but also of difficulty builders are having in producing smaller single-family homes, townhomes and condominiums – products designed particularly for younger buyers, waiting to make their first purchases.
That leaves the burgeoning apartment market, where an onslaught of massive products – some 7,588 units in metro Denver this past year – is very visible in popular parts of the metro area now, including downtown, Boulder, and the south I-25 corridor. But despite some local bumps in vacancy rates as new units come on line, vacancy in the Denver area remains low, dropping from 5.2 percent in fourth quarter 2013 to 4.7 percent in fourth quarter last year. Rents are rising in kind – up 12 percent last year and up 16 percent since 2008 at the start of the recession.
Growing construction activity in Colorado is a major player in the state’s rising economy, totaling $5.15 billion last year, or 1.7 percent of the state’s gross product, creating some 81,375 full-time equivalent jobs (almost 3 percent of Colorado’s labor force), and contributing $1.19 billion to state and local government coffers.
